Carer Allowance (CA) income test – determining reference tax year and assessable income components 009-18082301

From 20 September 2018, to be eligible for Carer Allowance (CA) and Carer Allowance Health Care Card (CA HCC only), the carer's and their partner's combined Adjusted Taxable Income (ATI) must be under $250,000 a year. The same income limit applies if the carer does not have a partner.

Carers are deemed to have met the income test while they are exempt from providing their income details for the CA income test.

The CA income test is based on the Adjusted Taxable Income (ATI) of the carer (and their current partner if they have one) for the applicable financial year. It includes deemed income from account-based income streams if the account holder is 60 years of age or older.

The income test does not affect the rate of CA. The income limit is a fixed amount and is not indexed.

ATI is the sum of:

• Taxable income - even if the person is not required to lodge a tax return
• Target foreign income - foreign income on which Australian income tax is not paid
• Total net investment losses - the sum of net financial investment losses and net rental property losses
• Employer provided fringe benefits in excess of $1000
• Reportable superannuation contributions - these include salary sacrifice amounts plus personal superannuation contributions for which a person has claimed a deduction in their tax return
• Tax-free pensions or benefits
• Less child support paid - also known as 'deductible child maintenance expenditure'

Deemed income from an account-based income stream is added to the carer's or their partner's ATI only if the account holder is 60 years of age or older.

See the Resources page for further information, examples of income and how to calculate profit and loss.

From 1 July 2019, a CA review may be issued where a carer who is not exempt from providing their income details for the CA income test, experiences a change in circumstances or is identified by an ATO data-match, see Carer Allowance (CA) income reviews.

CA eligibility will always be determined using the Adjusted Taxable Income (ATI) from the reference tax year.

The carer may select either the previous tax year or the year prior to the previous tax year for their initial income details, however they are expected to provide the most recent details verified by the ATO (if they are required to lodge a tax return).

The reference tax year is usually the previous tax year. This is the tax year immediately before the current tax year. In the Social Security Act 1991 (section 957A), the previous tax year is called the base tax year.

If a carer is unable to provide income details for the previous tax year because the Australian Taxation Office (ATO) has not yet assessed their income for that year, then the year immediately prior to the previous tax year will generally be the reference tax year.

An estimate of the carer's (and their partner's if they have one) current year's income is only needed and recorded when the carer and their partner have income of $250,000 or more for the previous financial year and their income is expected to be lower in this financial year. If a carer provides an estimate of their current financial year income and it is not required do not record the current year estimate.

Where a carer's entitlement is to be determined using an income estimate for the current tax year, the reference tax year is the current tax year. Note: non-lodgement is not an acceptable reason to use the current tax year.

A carer and their partner must provide income details for the same reference tax year.

If the carer (and their partner) is not required to lodge an income tax return because their income is below the tax-free threshold or as a result of an Australian Taxation Office (ATO) tax offset, the reference tax year is usually the previous tax year. In some cases, the reference tax year may be the year prior to the previous tax year (see Person is not required to lodge a tax return).

Only where the carer's Adjusted Taxable Income (ATI) was too high (or their and their partner's combined ATI was too high) in the previous financial year they nominated, can the carer's CA qualification be assessed using a current year estimate of income subject to certain conditions.

The carer or their partner must have experienced a change in circumstances from the following reasons:

• retirement or partial retirement from the workforce, closure of a business, or receipt of an inheritance
• reduced working hours (ongoing) because the care receiver requires more care and the claimant is personally providing that care
• a substantial loss of income caused by a catastrophic event or natural disaster. For example, fire, flood or cyclone
• a substantial one-off cost because of the disability/medical condition of the care receiver

and the change must:

• have already occurred
• result in less income for the current year
• be satisfactorily demonstrated, and
• be one of the acceptable reasons for using a current year estimate for the Carer Allowance (CA) income test - see Acceptable reasons for using a current year income estimate for the CA income test on the Resources page

The same reason for providing a current year estimate will not be accepted for a second consecutive financial year unless the events are unrelated. For example, separate natural disasters are acceptable but the same disaster event can only be accepted for one year.

If a current year estimate is not accepted and a CA claim is rejected or CA is cancelled, the carer will generally need to reclaim after their tax return for the current financial year (and their partner's ) have been lodged and assessed.

If a carer has had their CA claim rejected or entitlement cancelled due to a current year estimate being not accepted, and the carer then lodges another claim, a revised estimate of current year income must be provided. The carer must also provide details of why the estimate has changed. The new estimate should only be accepted if both the reason and the amount are considered reasonable and have been verified.

See the Resources page for table containing suitable reasons for providing a current year estimate, and examples of acceptable evidence.

A person may not be required to lodge an income tax return for a number of reasons, the most common being if their income is below the tax-free threshold or as a result of an Australian Taxation Office (ATO) tax offset, or their only income was from a government pension or benefit. Non-lodgers do not receive a Notice of Assessment (NOA), so need to estimate the income for the relevant reference tax year.

If the carer is single and was not required to lodge an income tax return for the previous tax year, they should generally provide an estimate for the previous tax year. However if they have a Tax Notice of Assessment (NOA) for the year prior or for some other reason, income details for the year prior to the previous year must be provided.

If the carer is partnered and neither member of the couple were required to lodge an income tax return for the previous tax year, both should provide an estimate for the previous tax year. However, if one member of the couple or both have a Notice of Assessment (NOA) for the year prior or for some other reason, they income details must be provided for the year prior to the previous year.

If only one member of the couple lodged an income tax return for the previous tax year and the other was not required to lodge an income tax return, the person who was not required to lodge an income tax return should provide an estimate for the same reference year, that is, the previous tax year. However, they may elect to provide details for the year prior to the previous tax year, for example if they both lodged for that year.

In the online claim, paper claim or review, the carer is asked if they (and their partner if applicable) lodged an income tax return for the year they selected. If they did not lodge, they must pick from the following reasons:

• income below the tax-free threshold or tax offsets
• only received a government pension or benefit, or
• none of these reasons

If none of these reasons is selected, the claim or review summary will show they were not required to lodge for another reason.

The general principle is that a carer should provide the most recently verified income details, that is, select the year that was last assessed by the Australian Taxation Office (ATO).

However, a CA claim or CA income review does not identify if a person was required to lodge, only if they have lodged, and if they have not lodged, whether it was for the main reasons that the person was not required to lodge, or none of these reasons.

For the purpose of the CA income test, when a carer selects they and/or their partner did not lodge an income tax return for another reason, this is treated the same as 'not required to lodge'. Evidence of an ATO extension to lodge will not be required.

Single carers and members of a couple who did not lodge for a selected year may provide an estimate for the selected year.

Account-based income streams are also known as allocated pensions, allocated annuities or transition to retirement pensions. Transition to retirement income streams, both in the accumulation and retirement phase, are treated as account-based income streams.

These products must be deemed and accounted for in the CA income test where the carer is not exempt from providing their income details for the CA income test and the account holder is 60 years of age or older.

Deeming is only applied to account-based income streams and not any other financial assets a person owns.

Deemed income from account-based income streams is calculated using the current account balance and added to the Adjusted Taxable Income (ATI) details for the person. The carer must provide a Details of income stream product (SA330) form or similar schedule from their or their partner's income stream provider before the new account-based income stream can be added.

Carers will only need to provide income stream details for CA if:

• the account holder (the carer or their partner) is 60 years of age or older
• the details are not already held on the person's Centrelink record, and
• the carer is not exempt from providing their income details for the CA income test

The CA and combined Carer Payment (CP) and CA online claim will ask for account-based income stream details (including the current account balance) if the carer is not exempt from providing their income details for the CA income test.

Account-based income stream details may already be collected as part of the CP online claim. If not, they are collected as part of the CA online claim if the carer or partner are 60 years of age or older, and either Adjusted Taxable Income (ATI) for the past year is under the limit or a current year estimate is provided.

Where account-based income stream details apply, the deemed income amount is used to determine if the total ATI is over the limit. A Details of income stream product form (SA330) or a similar schedule will be requested to verify the details if applicable. Staff use Process Direct to record the details from the form for the claim or online review.

From 20 September 2018, carers who are not exempt from providing their income details for the CA income test are required to notify Services Australia if they or their partner turn 60 years of age and are receiving an account-based income stream, or start to receive an account-based income stream at any time after they turn 60 years of age.

When a carer notifies this, the Service Officer must check the carer's record to determine if a CA income review is required. If the system confirms the carer is not exempt from providing their income details for the CA income test, a review must be issued. The carer can then complete the CA income review online and attach Details of income stream product form (SA330) or a similar schedule to the review.

If an undisclosed account-based income stream is identified as part of the automated income stream update process, the income stream may be added before the system determines if a review is required.

Services Australia obtains information electronically from income stream providers for the purpose of identifying and reviewing income streams held by payment recipients, concession card holders and their partners. Under this automation process, the current account balance is automatically updated for CA recipients and their partners who have an account-based income stream recorded.

Where the automated income stream process identifies an undisclosed product, a compliance review will be undertaken to confirm the details so the income stream can be coded on the record. Once coded, the system will check if a CA income review is required.

New or updated account-based income stream details will also be collected if a CA income review is triggered as a result of a change of circumstance.

For more information see Adding or updating an account-based income stream.

An account-based income stream may be added:

• following notification from the carer
• after an undisclosed account-based income stream is identified and coded following a referral to compliance, or
• as part of a CA income review

After an account-based income stream has been added, a CA income review will be required if the carer is not exempt from providing their income details for the CA income test and:

• Adjusted Taxable Income (ATI) details were not provided in the current financial year, or
• they were provided but the total income including the deemed income is over the limit

Income stream reviews are not generated for CA recipients whose income stream account balance is not updated as part of the automation process. The deemed income from the last assessed current account balance will be applied to determine if a CA income review should be triggered as a result of subsequent Australian Taxation Office (ATO) data matching. Where the deemed income and Adjusted Taxable Income (ATI) for the previous tax year exceeds the limit and a current year estimate does not apply, the carer will lose their entitlement.

For more information about when Carer Allowance income reviews are generated, see Carer Allowance (CA) income reviews.